SUMA T R Project

A STUDY ON “IMPACT OF OVERHEAD COST ON
PROFITABILITY AT ASK AUTOMOTIVE (P) LIMITED
1. INTRODUCTION
In various five year plans, industrialization was given due importance. The
result is that a large number of establishments have grown up both in the public and
private sectors for man production for which use of improved and costlier and special
type of machines has become absolutely necessary. With the increasing trend towards
plant automation, heavy expenditure is being incurred which cannot be charged
directly to any particular unit and can be called as cost common to all units of
production. Overhead expenses being a significant proportion of the total cost
ascertainment and control by function and for guidance in certain managerial
decisions by the variability with production.
Overhead costs cannot be allocated but have to be suitably apportioned and then
absorbed by suitable methods. The cost accountant is required to pay so much
attention to the accounting of overhead cost as prudence choice of various bases used
for apportionment and absorbing the overheads in the cost of products as to be made
by cost accountant. Cost pertaining to a cost centre or cost unit may be divided into
two portions direct and indirect. All direct cost is termed as prime cost. The indirect
portion of the total cost constitutes the overhead cost, which is the aggregate of
indirect material cost, indirect wages and indirect expenses or any expenditure over
and above prime cost is known as overhead. Indirect expenditure is also called as
„Overhead Cost‟ arises as a result of overall operation of a business. It is a catchall
term and includes all manufacturing and nonmanufacturing supplies and services.
These represents a heterogeneous nature of service benefits supplied to total batches
of output. In other words overhead costs are those operating costs, which cannot be
associated with a particular product, or individual cost unit. They are expanded over
several products for the organization.
THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 1

1.1 OVERHEAD
Overhead means the cost of indirect materials, indirect labour, and other
expenses, including services, as cannot conveniently be charged direct to specific
cost units. Alternatively, overheads are all expenses other than direct expenses.
Indirect expenses are also called as overhead costs emerge as result of overall
operation of a business. The feature on common is their lack of direct traceability
to the individual product lines. Another feature is that overhead costs remain
relatively constant from period to period or at least do not fluctuate in amount to
changing levels of factory production.
1.2 DEFINITION
According to Bloker and Weltmer, “overhead costs are the operating costs of a
business enterprise which cannot be traced directly to a particular unit of output”.
1.3 STEPS IN OVERHEAD ACCOUNTING
 Collection of overheads
 Classification of overheads
 Apportionment of overheads
 Re-apportionment of overheads
 Absorption of overheads
1.3.1 COLLECTION OF OVERHEADS
Although the steps involved in the accounting and control of overhead in ASK
Automotive Private Ltd. Apply to all the classes of overhead in general, it is important
to study the procedure involved to collection allocation apportionment and absorption
of different classes of overhead individually. All items of the manufacturing overhead
are collected under separate standing order number allotted to them. This process
consists of making the entries in the relevant document at the source itself against the
standing order numbers as and when the expenses occur. In other words, transactions,
involving manufacturing overhead costs are analysed, and classified by the account
code, numbers, on the documents themselves. Such an analysis and classification of

expenses according to standing order numbers at the source itself, is known as

collection, accumulation or booking overhead. The important sources and documents
used for the purpose are:-
1) Indirect materials Material requisitions

2) Indirect wages Time sheets and wages analysis
3) Power and light Meter readings
4) Rent Lease
5) Rates Local government assessment
6) Office and stationary Suppliers invoice
7) Salaries Salary sheet
8) Depreciation Plant registers
1.3.2 CLASSIFICATION OF OVERHEAD COST

 Functional classification
 Classification with regard to behaviours of the expenditure
 Elements-wise classification
 Classification according to nature of expenditure
A. Functional wise Classification of overhead

a) Factory overhead
b) Office and administration overhead
c) Selling overhead and
d) Distribution overhead
B. Element-wise Classification of Overhead

Classification of overhead is also done according to the nature and source of
the expenditure. This is classified into:
a) Indirect Material
b) Indirect Labour
c) Indirect Expenses

C. Behavioural Classification of Overhead

This classification is made on the basis of nature or behaviour of expenditure.
This can be divided into:
a) Fixed Cost
b) Variable Cost
c) Semi-variable Cost
A. Functional Classification of Overhead

When the overhead expenses are divided with reference to major divisions of a
concern, it is called as functional classification of overhead. This classification is
needed for the segregation of the cost of each of the principle functional division of
the concern and for having separate methods of accounting and control for the
multiple natures of expenses in each division.
a) Manufacturing or Production or Works Overhead

It means indirect expenditure incurred in connection with production
operations. It is the collection of factory indirect material cost, indirect wages and
indirect expenses. Unlike direct materials and direct labour, production overhead is an
invisible part of the finished product. example of these cost are lubricants, consumable
stores, indirect wages, factory power and light, depreciation of plant and machinery,
depreciation of factory building, repairs and maintenance etc.
b) Administration Overhead
It is the indirect expenditure incurred in composing or formulating the policy,

directing the organization, controlling and managing the operations of an undertaking
which is not related indirectly to research, development, production or selling activity
or function. It comprises of all expenses incurred in direction, control and
administration (including secretarial, accounting and financial control) of an
undertaking. Examples are the expense is running the general office e.g. office rent,
light, heat, salaries and wages of all clerks, Secretaries and accountants, credit
approval, cash collection and treasurer‟s department, general managers, directors,

executives; legal and accounting machine services; investigation and experiments and
miscellaneous fixed charges.
c) Selling Overhead
It is the cost of create and stimulate demand and of securing orders and
contains the cost of soliciting and recurring orders for the articles or commodities
dealt in and of efforts to find and retain customers. It refers to those indirect costs,
which are connected with marketing selling (excluding distribution activities).
Examples are sales office expenses, advertising, packing and forwarding, sales
promotion, exhibition expenses, selling commission, cost of marketing information
system and costs of catalogues and price list.
d) Distribution Overhead
It is expenditure incurred in the process, which begins with the making the
packed product available for dispatch, and ends with making the reconditioned return
empty package, if any available for reuse. It includes all expenditure incurred from the
time the product is completed in the works until it reaches its target. Under these
would be included warehouse rent, warehouse staff salaries, insurance; expenses on
delivery van and trucks; losses in warehouse stocks and finished goods damaged in
transit and cost of repairing and reconditioning of empties and wastage of finished
goods.
A. Element-wise Classification of Overhead:-
There are diverse items drop under this head of classification of overhead. Let
us study the items which fall under this head with the help of following table.

Table No: 1.1

Element-wise Classification of Overhead
Indirect Materials Indirect Labour Indirect Expenses
a)Power and fuel a)Wages for maintenance a)Salary for factory staff
b)Lubricant oil worker b)Training expenses
c)Stores consumed for b)Workmen‟s compensation c)Depreciation plant,
repairs and maintenance c)Idle time machinery and building
work d)Over-time and night shifts d)Insurance
d)Deficiencies, loss and bonus e)Taxes
deterioration of stores e)Holiday p51ay/leave pay f)Rates and rents, lighting and
e)Sundry stores of small f)Miscellaneous allowances heating
value expended for to funds g)Hospital and dispensary
factory use g)General indirect labour canteen
f)Small tools for general salary of store keeper and
use foremen
h)Employees contribution to
funds
Source: M.N.Arora, “Management Accounting” Himalaya Publishing House.
B. Behavioural Elements of Overhead Classification
a) Fixed cost of Overhead

It represents those which tend to be unaffected by variation in volume of
output. These are expenses, which must be met irrespective of volume of output. It is
also known as cost of providing the conditions for production rather than cost of
production fixed cost have been called as period cost or stand-by cost because these
cost will be incurred even when no production activity takes place.
There are three types of fixed overhead namely:-

 Long-run capacity fixed overhead

 Operating fixed overhead
 Programmed fixed overhead
b) Variable Overhead
Variable overhead refers to expenses, which tend to change (in aggregate)
directly with changes in volume of output. Such expenses increase in aggregate as the
output goes up and decrease proportionately when the output falls. However, there
may not always be a perfect mathematical relation. The examples of variable overhead
are: indirect materials, fuel and power, carriage outwards, packing materials, lighting,
internal transport, store losses, idle time, etc.
c) Semi-Variable Overhead
Semi-variable or semi-fixed overhead costs refer to expenses, which are partly
fixed and partly variable; these costs are fixed up to a certain volume of output. If
however, the output rises beyond that limit, these costs shall increase in aggregate
although the increase in the expenditure will not be proportionate to the increase in
output. Examples of semi-variable overhead costs are: depreciation of plant
machinery, repairs and maintenance, cost of supervision, service department wages,
postage and stationery, etc.
1.3.3 APPORTIONMENT OF OVERHEAD

Apportionment of overheads cost refers to distribution of overheads on some
basis, which are not attributable to any cost centre.
The bases for apportionment of overheads are:-
1. Pay roll or time keeping - Number of employees
2. Personnel department - Number of employees
3. Store keeping - Number of requisition
4. Welfare – Number of employees
5. Canteen – Number of employees
6. Recreation room expenses – Number of employees

7. Purchase department – Number of purchase orders

8. Security service charges – Number of employees
9. Fire insurance
a) For capital items – value of capital items
b) For stores – average value of goods in stock
10. Lighting – Number of lighting points
11. Rent – Area of coverage
12. Coal handling charges – Based on production, to different plant
13. Legal and professional charges – Number of employees
14. Electronic data processing charges – Based on production
15. Printing and stationary – Based on sales
16. Membership fees to institution – Number of employees
17. Subscription to journals and periodicals – Based on production
18. Research and development expenses – Based on production
19. Miscellaneous expenses – Actual sales
20. Maintenance and repairs – Cost of machinery
21. Depreciation – Asset value
The basis of apportionment of expenditure of common system have been

arrived at after studying the existing database so that there is no difficulty in
implementing the producer laid down. It is obvious however that the financial
accounts data is to be updated more frequently if the cost analysis is to reflect the
current cost statements.
Allocation means charging the full amount of overhead cost to a cost centre. It
has been defined as “the allotment of whole items of cost to cost centre or cost unit.
1.3.4 RE-APPORTIONMENT OF OVERHEAD

Once the overheads have been allocated and apportioned to production and
service department and totalled, the next step is to be re-apportioning the service
department costs to production departments. This is necessary because our ultimate
object is to charge overheads cost units, and no cost unit pass through service

departments must be charged to production department. There various methods of

apportionment of service department overheads they are:-
a) Apportionment to production departments only:-Here the total amount of
each service department is distributed to only production department.
b) Apportionment to production as well as service department:-Often a
service department renders service not only to production department but also to other
service departments. Example: maintenance department looks after not only the plants
and machinery of production department but also the equipment of other service
departments to power house, materials handling etc.
1.4 ABSORPTION OF OVERHEAD

After the allocation, apportionment and re-apportionment of overheads to
production departments are complete. The total overhead cost of production
department will consist of:-
a) Its own expenses e.g., indirect materials, indirect wages etc.
b) Share of common expenses e.g., factory rent, lighting and heating.
c) Share of the costs of service departments reapportioned to it.
This gives the total overhead cost of each production. The total cost of
production department is then to be absorbed by the products manufactured in the
respective production departments. This is known as absorption. The absorption of
overheads is the last step in the distribution plan of production Overheads. It is the
process of charging to the product or output of the production department all the
overhead expenses, which have been allocated and apportioned to it. The purpose
behind absorption is that overheads should be absorbed in the cost of the output of the
given period.
1.4.1 METHODS OF ABSORPTION
Percentage on direct materials: - In this method overheads are absorbed on the basis
of direct materials consumed in producing the product. A percentage of factory
overheads to the total value of materials consumed are determined.

Percentage on direct wages: - In this method percentage of factory overheads to

direct labour cost is computed.
Percentage on prime cost: - This method taken into consideration both direct
materials and direct wages for the absorption of overhead. Overhead rate in this
method is calculated by dividing the factory overhead by the prime cost.
Machine hour rate: -Machine hour rate means the cost of running a machine for one
hour. This rate is obtained by dividing the amount of factory overheads concerning a
machine by the number of machine hour. Overhead charge to a job is made on the
basis of number of machine hour worked on that job.
1.5 OVERHEAD VARIANCE
The variable overhead spending variance is difference between actual and
budgeted rates of spending on variable overhead. The variance is used to focus
attention on those overhead cost that vary from expectations.
1.5.1 Meaning of Variance
Variance is the variation between standard specified and the actual element. It
indicates a divergence of the actual form some anticipated ideal. Whenever a certain
aspects of performance deviate from specific expectations, the variance onset. A
variance can be for any phenomenon, which fails to reach the target performance.
1.5.2 Favourable and Unfavourable Variance
The variance can be either debit or credit depending on whether the actual
exceed or shortfall of the standard stipulation. Debit variance, which results when the
actual cost exceeds the standard that can be viewed as additional costs or losses and
credit variance result when the actual cost is below the standard cost, is viewed as
profit.
1.5.3 Utilities from Variance Information
1) Top management
2) The functional management
3) Cost accountant.

1.5.4 Meaning of Overhead Variance:
Overheads are understood as the aggregate value of indirect material, indirect

labour and indirect expenses. Such costs cannot be directly allocated with the
production and are untraceable at a particular unit of production but can be ascertained
in the end.
After all the production is over of a particular period, the actual expenses are
totalled and compared with standard, which was already estimated. If it is any
variance in cost of overhead it will be called by overhead variance.
Standard cost accounting system as three steps involved in isolating overhead

variances are:-
1. Factory overhead incurred recognized on the basis of actual cost

2. Factory overhead is applied to WIP(work in progress) inventory on the basis of
budgeted values
3. Reporting of over or under applied factory overheads the application of SOAR is
determined with the formula as
Total factory overhead

SOAR=
Standard activity volume
SOAR=Standard Overhead Application Rate
1.5.5 Capacity levels
The concept of capacity level is important for overhead for overhead analysis.
To make judgmental forecasting consideration of such factors expected sales
inventory levels and plant capacity, Normal capacity plays a unique role.
In overhead variance analysing the capacity measurement these are either

related input or output with any base like:

a) Units of production
b) Direct labour cost
c) Direct labour hours
d) Machine hour
e) Material cost
Table No: 1.2
TABLE SHOWING STATEMENT PREPARED BY VARIOUS

DEPARTMENTS ON OVERHEAD VARIANCE
Sl.No Variance Personnel/Department Responsible Control

Period
1 Overhead spending variance Variable portion is responsibility of

individual supervisors. They are
expected to keep actual expenses
within the budget and fixed portion of
responsibility is of top management.
Monthly
2 Overhead Efficiency Variance Some person responsible for Labour

efficiency variance
Monthly
3 Overhead Volume \Variance Top management and production

schedules
Monthly
Source: www.answers.com/topic/overhead-planning

2. REVIEW OF LITERATURE AND RESEARCH DESIGN
2.1 TITLE OF STUDY
A study on “Impact Of Overheads Cost On Profitability” with reference to ASK

Automotive (P) ltd.
2.2 REVIEW OF LITERATURE
Yong-Woo Kim & Glenn Ballard (2012) “A study on overhead costs analysis “This
paper “Multi-cost objects” is one of characteristics of the tool. A case study revealed
that the new analysis is feasible on actual construction projects and has many positives
with some limitations. It is noted that the proposed method can be applied in the same
manner to analysis of home office overhead costs to be allocated to multi projects.
Important is that the new tool can pinpoint the area to be investigated for improving
the profitability relationship. It can be construed as a tool for nurturing described the
new overhead cost analysis tool and the results of the case study under the situation
where most works are subcontracted relationship as opposed to having a quantitative
target as a motivation.
Erich Evans (2012) “Variance analysis & standard costing which helps to overhead
costing” Manufacturing overheads variances are examined at the work centre level.
These variances helps to determine when equipment is not running as expected, which
leads to repair or replacement. Variance also helps in identifying inefficient way to
use equipment. Management reviews current and future capacity utilization on a
monthly basis, using standard hours entered into the plants Enterprises Resources
Planning System. The standards are a useful tool in identifying capacity cons taints
and future capital needs. Standard costing tool needs to produce costs that are not only
understood by management accountants and industrial engineers, but also by decision
makers in marketing and production department. The review suggests that the costing
technique will help a management to achieve high degree of process understanding
and involvement. The result will reach to lower wastage, process improvement and
efficiency in cost, all these contribution reaches towards the profitability.

Caroline Takwa Chan & Christine Pasqire (2010) “Estimation of project

overheads: A contractor’s perspective “The survey of forty-nine large contractors in
Hong Kong, it was found that almost all of them would estimate the project overheads
in detail. However, most of the estimators still relied on their experience to work out
the estimates without much use of artificial intelligence. A good reference to cost data
seemed not to be a common practice, and only accounted for around 33percent of the
total sample. Results from the interviews identified misalignment between the
perceived importance of the project overheads estimation and the level of resources
allocated to project overheads estimation by the contractors. Only 9percentof
interviewees felt that project overheads was the most important component in
estimation, but all of them allowed senior estimators only to carry out the estimation
task. Besides, 82per cent of interviewees agreed that the risk of estimation errors in
project overheads was the most difficult to transferred.
However, majority of them (around 77per cent) commented that inaccuracies did exist
in project overheads estimation, particularly for items like site management salaries,
protection to works, site cleaning and site offices. The results evidenced the
inadequate concern and importance of project overheads estimation, and more studies
in this area should be done. Besides the overall review of project overheads
estimation, the interviews also generated a total of 23 project overhead items for
future study in project overheads estimation.
Don R. Hansen, M.M.M.L.G. (2009): Don Hansen defines overhead cost as all the
production cost other than direct labour and direct material that are incurred during
production process. The cost of direct material and manufacturing overhead must
allocate to each and every unit produced. This is done to value in the inventory and
the costs of goods manufactured, and then report them according to the general
accounting principles. Manufacturing overhead may include cost like electricity which
is used to operate the factory equipment, depreciation of factory equipment, salary of
indirect labour and all the cost related to production except direct labour and direct
material. Nonmanufacturing overhead includes activities related to the selling and
administration departments. These costs are not included in the cost of goods sold as
they are directly in the income statement as expenses. Nonmanufacturing overhead

includes cost such as freight charges, property tax, maintenance of equipment and
salary for employees of selling and administrative department.
KHALIK (2008): In procedure all the manufacturing costs are accumulated into cost
pools and then formula is applied in apportioning the overheads in the business. As
such allocation becomes: cost pool/total activity measure= overhead allocation per
unit absorption costing in some cases, the overhead cost are ignored from the general
expenses realized by a business. In this case, absorption costing is an important way of
ensuring that such omissions are well addressed. Unlike variable costing where the
fixed cost are not actually absorbed by the product, absorption costing ensures that all
the direct cost realized in the production of goods are factored with in the cost base.
Through the use of absorption costing, the overhead costs are easily included
in the total production cost and can therefore be attributed to any unit production. Tax
advantages manufacturing overhead costs are normally tax deductible. Most of the
overhead costs are normally deductible in the every year they are incurred which
actually works to the advantage to the business.
Patrick Roney (2007) “A study of the impact of foundations overhead payment

policies “The research foundations‟ giving patterns, the results of this study indicate
that foundations do fund non-profits‟ overhead expenses, but they do so mostly
through the inclusion of overhead expenses within program grants. Larger foundations
and those that fund locally are more likely to fund non-profit‟s overhead. Whether or
not an educational or human services organization has adequate funding to pay for
overhead expenses depends largely on their revenue. Larger non-profit organizations
were statistically more likely to have adequate or more than adequate overhead
funding. However, when human services organizations did rely on foundation funding
for a large proportion of their budget, they were statistically less likely to report
adequate overhead funding. The condition of the educational or human services
organization‟s infrastructure is statistically correlated with both charitable and non-
charitable revenue. Larger organizations are statistically correlated with better
infrastructure. From the Centre‟s case studies, organizations with good or excellent
infrastructure had diversified funding (i.e., they did not rely on just foundation

support) and a high percentage of unrestricted overhead. Yet these organizations were
still chronically understaffed. Youth Link, an organization with significant
unrestricted foundation support did not spend funding on their infrastructure – despite
a desperate need to do so, and would not spend more on overhead even if they
received more funding. Their unrestricted support is short– term, and the executive
director‟s intuition was that if they were able to serve more youth then eventually they
would able to increase their funding and spend more on overhead.
DRURY (2000): “study on nature of overhead has changed from cost “ on the other
hand, today‟s companies typically have a wide variety and complexity of products and
services, high overhead cost compared to direct labour, an overabundance of data and
substantial non product costs that can dramatically affect true product cost. The nature
of overhead cost has changed from costs which were predominantly influenced by
volume-related factors to composition determined largely by non-volume-related
factors. Thus, overhead allocation using a declining direct labour base cannot be
justified, because computer technology has reduced the cost of developing and
opening of cost system that track may activities.
2.3 STATEMENT OF PROBLEM
Private sector units/enterprises in the present day context are known for
incompetence and inefficiency in production. The products produced by most of these
enterprises are relatively costly and hence demands for their products have come
down considerable resulting in losses. This is perhaps mainly due to the overhead
expenses being the indirect expenses, most of the organizations do not concentrate on
it. Though they take overhead expenses into account, they do not give much
importance for its effective analysis and control. But like direct expenses overhead
analysis & control is also a necessary work of the organization. The changing being
the order of the day, if there is no force thought of overheads along with *direct costs,
the industry might not face the environmental changes, which in turn affects its
performance. Therefore to visualize and have force thought, effective analysis of
overheads; strategic planning and control relating to it can be done. Thus “Analysis of
Overhead” is one of the effective tools for strategic planning overhead control.

2.4 OBJECTIVE OF THE STUDY
 To analyse the various existing overheads and suggest for better control.
 To know the impact of indirect expenses on sales.
 To analyse the working results of the organization to know solvency and profit
and loss of the organization through the financial statement of the organization.
 To recommend and suggest the company for control of overall overhead cost.
2.5 SCOPE OF THE STUDY

The study focus on overhead costing of ASK Automotive Private Ltd it
includes only manufacturing overhead, office and administration over head,
selling distribution overhead it doesn‟t include prime cost, machine hour rate and
variances.
2.6 RESEARCH METHODOLOGY
Research methodology is a way to solve the research problem in a systematic

manner. It may be understood as a science of studying how the research is done
significantly. Research methodology is the arrangement of conditions for collection
and analysis of data in manner that aims to combine relevance to research purpose
with economy in procedure.
The methodology may differ from problem to problem, yet the basic approach
towards the research remains the same. Analytical research method has been adopted
under this study.
2.7 DATA COLLECTION

The data for this study is collected from secondary sources. Basically there is a
two types of data collection, one is primary data (the sources of was collected through
personal interviews and discussion with the concerned person). Another one is
secondary data (the data is collected and analysed namely).

SOURCES OF DATA
The data collected for this study from secondary sources. Secondary sources
refers to those where data is collected from any existing records, which are prepared
for some other purposes like production unit, marketing department and
administration department..
1. SECONDARY DATA
Secondary data is the data that is already collected and analysed namely,
 Company journals
 Annual records
 Web page
 Books
2.8 PLAN OF ANALYSIS

The data collected will be analysed with the help of following tools
 SWOT Analysis
 Solvency ratios
 Overheads formulas
Apart from these tables, graphs, pie charts various mathematical and statistical tools
and techniques will be used for analysis. From the proposed study, findings and
Implementations as well as an arriving at a conclusion will be interpreted. The
suggestion is also drawn from these data.
2.9 LIMITATION OF THE STUDY
 The analysis of this project is limited to overhead cost only.

 The project covered the period of only three years.
 Analysis is based on the information provided by the company.
 The result varies from industry to industry and company to company. The
result of this study will not be compared with other industry.

2.10 CHAPTER SCHEME
CHAPTER 1: INTRODUCTION
This chapter gives the general introduction of overall overhead cost concepts. It
includes classification of over cost, apportionment of overhead
CHAPTER 2: REVIEW OF LITERATURE & RESEARCH DESIGN
This chapter gives an overview of the project giving information of title of the study,
review of literature, statement of the problem, objective of the study, scope of the
study, methodology, and limitations of the study.
CHAPTER 3: PROFILE OF THE INDUSTRY AND COMPANY
This chapter gives overall profile of the industry & company.
CHAPTER 4: DATA ANALYSIS AND INTERPRETATION
In this chapter the data collected is presented systematically in tables and analysed by
using SWOT analysis, solvency ratio, and calculation of overhead. Finally a
descriptive interpretation is provided.
CHAPTER 5: SUMMARY OF FINDINGS, CONCLUSIONS & SUGGESTIONS
This chapter begins with an overview of project, Findings are summarized under each
objective, Conclusion is provided to dissertation involving learning experience and
finally suggestion is offered based on the Findings.

3. COMPANY AND INDUSTRY PROFILE
3.1 INDUSTRY PROFILE
3.1.1 AUTOMOBILE SECTOR IN INDIA
Tata motors was launched its first truck in India. It was done in alliance with
Mercedes-Benz. The automobiles were introduced in 1947 that Indian started
manufacturing the automobiles. As per the history some of the early automobile
companies in India, in the late 1890s are
 Hindustan motors
 Premier automobiles
 Tata motors
 Bajaj auto
 Ashok and standard motors
Sanjay Gandhi was the first Indian politician who promote the require for a “people`s
car”. With the extension in the Indian economy, the big international car
manufacturers like General Motors, Ford, Toyota, Hyundai, Rolls Royce, Bentley and
Maybach move into the Indian market. Earlier in the 1920`s Rolls Royce collection
was the maharajas status symbol. The middle classes also started possessing their own
automobiles in India, the highways and expressways were constructed. The renowned
international automakers like Ford, Suzuki, GM and Honda have their manufacturing
foundation in India. But, the Automobile Industry in India is dominated by domestic
companies like Maruthi Suzuki, Tata motors, hero Honda, Mahindra, Ashok Leyland
and Bajaj auto etc.
3.1.2 MILESTONE ACHIEVED
The automobile companies are achieved more in India are:
In 1897 the first automobile in India rolled in Mumbai. International players are put
on to their investments in India auto industry. As far as the two-wheelers are anxious,
motorcycles contribute 80% of the segment size. IN Indian the passenger vehicle

market is dominated by cars by 79%. India is the one which as biggest automobile
industry is largest three wheeler market in the world. And also India is the largest two-
wheeler manufacturer in the world. It is the second largest manufacturer in the world.
The automobile industry in India is the 5th largest tractor manufacturer in the world.
The automobile industry in the India is the fifth largest commercial vehicle
manufacturer in the world. India is the fourth largest car market in Asia.
ASK is the first Indian company which awarded the QS 9000 certificate of
approval in its category, and also followed by another land mark of achieving
certification TS 16949:2002. By keeping quality and safety as its top precedence,
progressive improvement also remains our impose area. It introduces the stringent
quality controls which ensure that our customers have received the highest quality
products and services on a uniformity basis. It always focus on improvement through
quality tools e.g.-CEP, FMEA, MSA, TPM, KAIZEN, QUALITY COST,5-S. ASK is
the one of the rare company which supply to all the 2-wheeler manufacturers in India,
where the supplies are made on JIT basis. And the delivery PPM (parts per million) to
all our customers is zero. The quality PPM of their product is well within the accepted
norms of their OEMs (original equipment manufacturers).
3.1.3 COLLABORATION
ASK has been persistent shining with state-of-the-art manufacturing facilities across
the India by collaborating with world leaders in manufacturing technology. The
company has technical collaboration with the
 ASK Technical Corporation Japan

 Safety Control Cable Ind.co.ltd.(HSH),Taiwan
 NUCAP, Canada
 ASK has joint venture agreement with Fras-le, Brazil (part of Random Group)
for the production of brake pads and linings for commercial vehicles.

3.1.4 KEY STRENGTHS
 It is the largest 2-wheeler friction products manufacturer in India.

 It is the State of the art manufacturing facility.
 In house design centres and tool and die manufacturing facility.
 In house testing and validation facility

3.2 COMPANY PROFILE
3.2.1 HISTORY
ASK Automotive Private Limited is an incorporated on 18 January in 1988 and

located at New Delhi. It is categorize as non- government company and is registered
of companies, Delhi. Its authorized share capital is Rs.120000000 and it‟s paid of
capital is Rs.88941000. It involved in manufacturing of parts and accessories for
motor vehicles and their engines like brakes, gear boxes, road wheels, suspension
shock absorbers, radiators, silencers, exhaust pipes, steering wheels, steering columns
and steering boxes and parts and accessories.
ASK Automotive (P) LTD is a leading player in the manufacturing of Friction

Products in Two-Wheeler segment in 1989 by MR.K.S RATHEE with a vision of
“achieving excellence in the field of manufacturing Automotive”.
Over a range of two decades ASK automotive has extend from small manufacturer to
crucial supplier of friction material, which includes brake assemblies, brake shoe,
clutch plate and aluminium casting products like panels, hubs, non-automotive, crank
case and engine parts etc. to the original equipment manufacturing in India. They
placed themselves as key resources for leading OEMs with their commitment to
innovation, competence to process improvements, quality control and customer
service.
It is a leading producer of Friction products, when we look out the history of 3

decades, the company has been committed to excellence in engineering and rigorous
controls on quality at every stage of its manufacturing process.it always focus in
quality, cost competitiveness and on time delivery. The company was established in
1989, today it generates a turnover of over a 220 million USD and it has its own
design and manufacturing, research and development facilities.
ASK automotive private limited set up 14 plants in overall India includes Gurgaon,
Hariyan, Ahmedabad and Dehradun etc. with the goal of delivering quality products to
ensure the best performance in the industry. The first plat was set up at Gurgaon in the

year 1989, the plant was located at industrial park-4, Begumpur, Haridwar, plant
number 21 and the plant head was Mr Ashok Kumar Chaudhary. The company today
generates a turnover of over 260 million USD. Throughout its history of nearly 3
decades, the company has been committed to excellent in engineering and rigorous
controls on quality at every stage of its manufacturing process.
In 2001 it setup its ASK-2nd plant at Harayana, and in 2004 and in 2009 again it set
up one 3rd and 4th plant at Guargon, the 5th plant at Haridwar in 2009, the 6th plant at
Gurgaon in 2010,the 7th plant at Gurgaon in 2013, the 9th plant at Bangalore in 2013
which is located at Narasapura industrial area, the 10th and 13th plant at Gurgaon in
2014,the 12th plant at Gujarat in 2015. In December 2017, ASK entered into a joint
agreement with Fras-Le, Brazil (part of Random Group) for the production of brake
pads and linings for commercial vehicles (trailers, trucks and buses above 3.5 tonnes)
to supply the OEM and IAM markets.
In 2013 it registered and establishes its 9th plant at Banglore, it extende to Narasapura
industrial area, plant number 176, Kolar. It has gained immense expertise in supplying
and trading of Aluminium die casting component, crank shaft, rear grip etc. The
supplier company is located in Kolar, Karnataka and is one of the leading sellers of
listed products. Buy aluminium die casting components, crank shaft, and rear grip in
bulk from us for the best quality products and services. The company was number one
in the Indian aftermarket that caters to the replacement market. They have the network
of 331 dealers and more than 125000 retail counters ensures our products are available
across India. With the business motto “safety first” ASK is focused on ensuring that
its products are always users first choice.
ASK automotive ltd located at Narasapura, it boast up an excellent team of highly

qualified and experienced professionals with an in-depth understanding of the
customer‟s requirement. Their team of professional‟s expertise in providing end-to-
end solution for the varying requirements of the clients.it working as team and
providing quick and responsive services to their customers. The work culture is that,
ASK group [stands towards maintaining 5-S and TPM are being undertaken in the
company for achieving overall excellence.

ASK, believe that people are one of their most important sustainable compete
advantages. That‟s why they recruit only highly motivated and focused individuals
who want to take their career to new heights. It provides a work environment that
encourages the free flow of knowledge and ideas culminating in rewarding excellence.
In-house as well as external training keep the manpower abreast of technical and
market related developments. Employee induction is a result of corporate growth, new
product line or natural attrition.
3.2.2 VISION
The vision of ASK AUTOMOTED PVT.LTD. Is that, “we want all our products to
be yours first choice” by keeping this in mind all the workers and engineers of ASK
work as a unit to do better than ever.
3.2.3 OBJECTIVES
 It focus on 100% commitment
 Poka yoke implementation (to prevent inadvertent errors which made by
workers).
 SPC (statistical process control) practices, to find out and control the cause of
variation in a process.
 sustained improvement in productivity and quality
 limiting in rejection and rework
 Reduction in machine and tooling maintenance
 Optimization of inventory levels
3.2.4 COMPANY MILESTONES
1989 Setting up of company
1994 “best vendor award” from kinetic motor
1998 ISO-9002 certification
1999 QS- 9000 certification

2001 Signed TCA with ASK Technica Corp of Japan
Setting up of Unit- II
Setting up of Pressure die casting facility
2003 “challenge India award “from HMSI
2004 Setting up of unit- III
Setting up of paint shop
TS16949 certification
2005 “best and faster development award” from HMSI
2006 Setting up of In-house tool room
2007 Setting up of design center
2008 OHSAS 18001:2007 certification
2009 Award in proprietary and “certificate for quality and delivery

“from HONDA (HMSI)
3.2.5 QUALITY CONTROL
In India ASK AUTOMOTIVE is the first company which awarded QS 9000

certification of approval in its category. And the company is certified for ISO
9001:2008, QS 9000 to ensure highest level of compliance to the quality and fault
prevention, which explains the company outstanding global reputation.
The delivery PPM (Part per million) to all their customer is zero
 PPM (part per million) measurement used by many customers to measure

quality performance.

 One can now control process in order to control the quality. Quality cannot be
inspected in after the fact. It is the result of careful planning, design, and
execution.
3.2.5 CLAINTS OF ASK AUTOMOTIVE (P) LTD

3.2.6 EHS (ENVIRONMENTAL AND HEALTH SAFETY) POLICY
We, at ASK Automotive Private Limited, are committed to car for our environment,
health and safety through conservation of natural resources, continual improvement of
EHS management and performance through setting of improvement objectives,
protection of environment, prevention of pollution, injuries and ill health as a caring
corporate for the society and globe. And it is committed to:
 Compliance with all applicable and relating to environment, occupational

health and safety.
 Adoption of best practices in development and manufacturing of EHS friendly
products and solutions for our customers.
 Reduction or removing adverse impacts and risk to ESH by upgrading all
processes, operations and practices.

 Enhancing EHS awareness through communication of this policy to our

employees, affiliates stakeholders and all interested parties and reviewed
periodically.
3.2.7 ASK AUTOMOTIVE (P) LTD OVERVIEW
India HO Gurgaon
Company size 2350+ employees
CIN U34300DL1988PTC030342
TYPE Private
CATEGORY Company limited by share
SUB – CATEGORY Non –Government Company
WEBSITE http://www.askbrake.com/
EMAIL info@askbrake.com
FOUNDED 18 Jan, 1988
PAID-UP CAPITAL 88,941,300
AUTHORISED CAPITAL 120,000,000
ACCREDIT ISO/TS 16949

3.2.8 DIRECTORS OF ASK AUTOMOTIVE PVT LTD
NAME DESIGNATION DATE OF JIONING
Kuldip singh Rathee Managing director 18 Jan 1988
Vijay Rathee Director 26 Oct, 1995
Prashanth Rathee Director 27 Apr, 2018
Aman Rathee Director 27 Apr, 2018
Anand kumar Baradwaj Director 10 July, 2013
3.2.9 AWARDS AND REWARDS
 Awarded for “quality and delivery” by HMS IN 2015-16

 Awarded for “cost competitiveness” by Suzuki in 2015-16
 Awarded for “superior support performance” by Suzuki in 2015-16
 Awarded for “outstanding development support “ by Denso in 2015-16
 Awarded for “best newcomer” by Auto Mechanica, Moscow in 2016-17.
3.2.10 CERTIFICATE AND ACCOLADES
 AWARDED “sap Ace award” for operational excellence- manufacturing in

2018
 Awarded for “delivery management” by Honda in 2017-18
 Awarded for “spare parts delivery” by Suzuki in 207-18
 Awarded for “periodic cost down” by Suzuki in 2016-17
 Awarded for “quality and delivery” by Honda in 2016-17.
info@www.askbrake.com

3.3 PRODUCT PROFILE
3.3.1 PRODUCTS OF ASK AUTOMATIVE
 BRAKE SHOE
 DISK BRAKE PAD
 BRAKE LINING
 BRAKE ASSEMBLY
 CLUCH PLATE AND SHOE
 ALUMINIUM DIE CASTING
 CONTROLS CABLES
ASK AUTOMATIVE (P) LTD MANUFACTURE Friction Products of two and four
wheelers. They manufacture brake shoes, brake lining, clutch plates, clutch weights,
heavy brake linings, and disk brake pad etc., both in asbestos-free formulations.
3.3.2 BRAKE SHOE
DESCRIPTION
Ask is India‟s largest manufacturer of brake shoes. The company has 70%SOB with
the major OE manufacturer of India in brake shoe segment. In order to keep up pace
with global technological standards, the company has also technical collaboration with
ASK technical corporation, Japan. Engineered to eliminate noise, vibration and
harshness, ASK brake shoe provide the ultimate braking experience.

Brake shoes are the friction element of a drum brake system. They are made out of
aluminium alloy, curved in shape and coated with friction material on one side. Brake
shoe can be re-manufactured or recycle for future use.
STRENGTHS
 It provides highest bond integrity.

 It facilitates correct shoe to drum contact for best performance.
 It provides best performance and service life.
 It facilitates stable and balanced braking.
 It delivers highest shear strength.
 It reduces noise and vibration.
 Premium dipped coating – provides resistance for superior durability.
 It ensures safe operation and adequate durability
 The industry‟s most affordable quality line of friction.
3.3.3 DISK BRAKE PAD

DESCRIPTION
Designed and tested for predominantly performance –oriented use. ASK brake pads
are the principal upgrade level for any braking mechanism. It ensures the ideal balance
between safety and performance alongside minimising the wear of the pads and discs
of the vehicle. Available in semi Met, Low Met and NAO mixes, ASK‟s market
presence is in all the segment -2 Wheeler, passenger vehicles and commercial vehicles
(heavy and light).
STRENGHS
 It facilitates ECE-R90 certified formulation.

 It provides Dynamometer testing facility for the product.
 NUCAP, CANADA licensee
 It enhanced initial effectiveness (no break – in required).
 It uses high resistance to fade.
 It facilitates consistent brake pedal feel.
 It provided Ultra-low dust for cleaner wheels and tires.
3.3.4 BRAKE LINING

DESCRIPTION
ASK is one of the leading manufacturer and exporter of brake lining for light and
heavy commercial vehicles. At our state of the art design and manufacturing facility,
we make wide range of non –asbestos and asbestos brake lining.it gives optimal
braking in all temperature, weather and terrain condition.
STRENGTHS
 ECE – R90 certified formulation

 Fully automatic manufacturing facility
 In-house Dyno testing facility
 Made to perform in extreme temperature ranges
 Low noise.
3.3.5 BRAKE ASSEMBLY
DESCRIPTION
ASK has the capacity to manufacture 10 million units annually. Its brake assembly
ranger encompasses 85 variants ASK manufacturers a wide range of brake assembly
for the leading OEMs in the country.

STRENGTHS
 In house tool room

 SMED Approach
3.3.6 CLUCH PLATE NAD SHOE
DESCRIPTION
ASK is a leading supplier of clutch plate and shoe to automotive industry in India.
ASK clutches are UN matched in terms of reliability, durability and performance.
ASK clutch plates and shoes adhere to the strict industrial standard and include
genuine components.
STRENGTHS
 Jerk free operation

 Superior surface furnish for better torque performance
 Better durability
 Anti – corrosive
 Wet operation
 Smoother gear shift
 Steel-steel friction combination

 Stationary field or rotating field option

 Stable coefficient of friction
 Low air consumption
 Low operating and maintenance cost
3.3.7 ALUMINIUM DIE CASTING
DESCRIPTION
In short span of 8 years ,ASK is producing more than 48000MT of casting annually
from a wide range of over 110 high pressure die casting machines ranging from 80 ton
to 900 ton. It is the leading manufacturer of brake panel assemblies and crank cases in
the country. We have state-of-the-art centralized design and die tool manufacturing
facility where we make around 300 dies annually. It had pioneered in die casting that
deliver precision results with shorter lead times.
STRENGTHS
 In house tool room

 In house metallurgical lab and testing rigs
 Leak testing machines
 X-ray testing
 Tomography technology

 Rapid cycle speeds

 Flash free castings
3.3.8 CONTROLS CABLES
DESCRIPTION
Ask manufactures a comprehensive range of control cables. ASK has collaborated

with safety cale Ind.Co Ltd. (HSH), Taiwan to meet international quality standard for
its cable division. The range includes front and rear brake cable, throttle cable, trunk
opener cable, parking brake cable, head lock control cable, clutch cable and more.
ASK fallows QCD philosophy which helps in maintaining consistency in every unit
manufactured.
STRENTHS
 In house testing
 Single piece flow manufacturing
 Friction free movement

3.4 CAPABILITIES OF RESEARCH AND DEVELOPMENT

CENTRE
3.4.1 FRICTION MATERIAL
 Dynamometer testing
 Chase machine
 Fully equipped laboratory for testing raw materials
 Salt spray testing
 Universal testing
3.4.2 DIE CASTING
 In house design centre and fully equipped tool room

 3D flow analysis
 X-Ray testing
 Spectrometer testing
3.4.3 CONTROL CABLE
 In house design centre

 Mud test chamber
 Endurance tester
 Temperature and humidity tester

4. DATA ANALYSIS AND INTERPRETATION
DATA:
Data is measured, collected and reported and analysed, whereupon it can be visualized
using graphs, images or other analysis tools.
ANALYSIS:
It is a process of breaking a complex topic or substance into smaller parts in order to

gain a better understanding of it.
DATA ANALYSIS:
Data analysis is the process of inspecting, cleansing, transforming, and modelling data
with goal of discovering useful information, informing conclusion, and supporting
decision making.
INTERPRETATION:
Data interpretation refers to the implementation of process through which data is

reviewed for the purpose of arriving at an informed conclusion. The interpretation of
data assigns a meaning to the information analysed and determines it‟s significant and
implications.

Table No.4.1
MANUFACTURING OVERHEAD (2016 TO 2018) (RS IN

LAKHS)
Manufacturing overhead
Manufacturing overhead= ─────────────────*100
Total Manufacturing Overhead
SL.NO Particulars 2015-16 % 2016-17 % 2017-18 %
1 Stores & spare parts 2494.4 34.72 3466.38 37.83 3848.82 39.40
2 Power & fuel 4375.35 60.90 5031.86 54.90 5500.41 56.25
3 Repair & maintenance 165.54 2.30 446.62 4.90 355.03 3.61
4 Water charges 3.65 0.05 4.39 0.05 5.21 0.05
5 Testing expenses 75.36 1.10 56.27 0.60 204.05 2.09
6 Factory maintenance 73.36 1.03 158.05 1.72 221.10 2.30
Total 7184.66 100 9163.57 100 9774.62 100
Interpretation:
The above table shows that the total manufacturing overhead cost has been fluctuating
from 2016 to 2018 because of increasing in all the manufacturing overhead. The
manufacturing overhead in 2106 was 7184 lakhs, in 2017 was 9163.57 lakhs and in
2018 was 9774.62 lakhs.

Graph No 4.1
MANUFACTURING OVERHEAD
(2016 TO 2018)
12000
Manufacturing Overhead
10000
9774.62 1 Stores & spare parts
8000 9163.57
2 Power & fuel
7184.66 3 Repair & maintenance
6000
4 Water charges
4000 5 Testing expenses
2000 6 Factory maintenance
100 100 100 6 Total

0
2015-16 % 2016-17 % 2017-18 %
INFERENCE
Stores and spare parts
The above analysis shows that the stores and spare parts expenses which plays main
role in the manufacturing process, in the year 2016 are 2494.4 lakhs of spare parts
expenses and in the year 2017 it was increased to 3466.38 due to incurring more
expenses on procuring spare parts which was increased to 3848.42 lakhs has sales are
more.
Power and fuel:
The above analysis shows that the power and fuel expenses in the year 2016 were
4372.35 lakhs and in the year 2017 it was 5031.86 lakhs. In the year 2018 it was

increased to 5500.41 lakhs this shows the power and fuel expenses are increasing from
2016-2018 due to more usage of power and fuel for manufacturing process.
Repair and maintenance:
The above analysis shows that the repair and maintenance cost of machinery were
165.54 lakhs in 2016 which was increased to 446.62 lakhs in 2017. But in the year
2018 it has get down to 355.03 lakhs which is good sign for the company.
Water charges:
The above charges shows that the water charges in the year 2016 was 3.65 lakhs in the
year 2017 was increased to 4.39 and in the year 2018 it was again increased to 5.21
lakhs.
Testing expenses:
The above analysis shows that the testing expenses which are necessary for checking
quality of machineries is increased for 75.36 lakhs in 2016 which was reduced to
56.27 lakh in 2017.but in the year 2018 it has gone up to 204.05 lakhs.
Factory maintenance:
The above analysis shows that the factory maintenance it increase to 73.36 lakhs in
the year 2016 but when compare to next years it increases it cost to 158.05 lakhs in the
year 2017 and 221.10 lakhs in the year 2018.

Table No.4.2
OFFICE AND ADMINISTRATION OVERHEAD
(2016 TO 2017) (RS IN LAKHS)
Administration overhead
Administration overhead= ─────────────────── × 100
Total Administration Overhead
SL.NO Particulars 2015-16 % 2016-17 % 2017-18 %
1 Employee benefit 11532.25 77.75 8619.44 34.77 9198.07 51.43

expenses
2 Rent 247.83 01.67 251.7 1.02 274.26 01.53
3 Telephone postage 53.67 00.36 67.65 0.27 60.32 00.34
4 Travelling conveyance 354.04 02.39 499.15 2.01 385.15 02.15
5 Legal professional 219.54 01.48 254.11 1.03 648.48 03.63

charges
6 Safety security expenses 159.12 01.07 210.73 00.85 213.73 01.19
7 Banking charges 10.01 00.08 14.89 00.06 21.79 00.12
8 Sundry expenses 2255.16 15.00 14867.75 59.98 7081.99 39.60
Total 14831.62 100 24785.41 100 17883.79 100

INTERPRETATION: The above table shows that fluctuations in overheads. The

total office and administration overhead is less in the year 2016, 24785.41 lakhs in
2017. But it has decreased in the year 2018 due to proper maintenance of office and
administration overheads like salaries, wages, rent, telephone and postage, travelling
and conveyance, security expenses, and banking charges etc.,

GRAPH NO.4.2
OFFICE AND ADMINISTRATION OVERHEAD
(2016 TO 2018)
office and administration overhead

100 8 Total
%
8 Sundry expenses
17883.79
2017-
7 Banking charges
18
100 6 Safety security
% expenses
5 Legal professional
24785.41 charges
2016-
17 4 Travelling
conveyance
100
3 Telephone postage
%
2 Rent
14831.62
2015-
16 1 Employee benefit
expenses
0 5000 10000 15000 20000 25000 30000
INFERENCE
Employee benefits expenses:
The above table shows that employee benefit expenses are 11532.25 lakhs in 2016
which was decreased to 8619.44 lakhs in 2017 in 2018.But in 2018 it gone up to
9198.07 lakhs.
Rent:

The above analysis shows that there were fluctuations in the rent charges from year to
year
Telephone and postage:
The above analysis shows that the telephone and postage expenses are 53.67 lakhs in
2016 which was increased to 67.65 lakhs in 2017, but in 2018 it decreases to 60.32
which are good sign for company.
Legal professional expenses:
The above analysis shows that legal professional expenses are 195.86 lakhs in 2016
which was gradually increased in the next two years in 2017 was 254.11 lakhs and in
2018 was 648.48 lakhs.
Safety and security expenses:
The above table shows that safety and security expenses in the year 2016 was 159.12
which is increased from year to year that is 210.73 lakhs in 2017 and 213.73 lakhs in
2018.
Travelling and conveyance:
The above analysis shows that travelling and conveyance expenses are 354.04lakhs in
2016 which was increased to 499.15 lakhs in 2017. But in the year 2016 it has
decrease to 385.15 lakhs which was good sign for company.
Bank charges: The above analysis shows that in the year 2016 bank charges is
10.01lakhs but in 2017 it was increased to 14.89 lakhs. Again in2016 it is increased to
21.79lakhs.

Table No 4.3
SELLING & DISTRIBUTION OVERHEAD
(2016 to 2018) (RS in lakhs)
Selling &Distribution overhead

Selling &distribution overhead= ─────────────────────── ×
100
Total Selling and distribution overhead
SL.NO Particular 2015-16 % 2016-17 % 2017-18 %
1 Sales and 236.87 17.83 319.80 20.81 298.01 15.69

promotion
2 Discounting 191.48 14.42 183.69 12.00 316.09 16.65

charges
3 Transportation 793.29 59.73 907.01 59.02 1171.62 61.71
4 Insurance 106.58 8.02 126.24 8.21 113.01 5.95
Total 1328.22 100 1536.74 100 1898.73 100
INTERPRETATION
The above table shows that the selling and distribution cost has been increased
from 2016 to 2018 such as sales promotion, discounting charges, transportation, and
insurance this is not a good for the company as the company spending more on sales
promotional activities .but it is the key factor used by the company to increase their
sales.

Graph No.4.3
SELLING & DISTRIBUTION OVERHEAD (2016 to 2018)
selling & distribution overhead

2000 1 Sales and promotion
1800 1898.73
1600 2 Discounting charges
1400 1536.74
1200 1328.22 3 Transportation
1000
800
600 4 Insurance
400
200 100 100 100 4 Total
0
2015-16 % 2016-17 % 2017-18 %
INFERENCE
Sales promotion: The above analysis shows that the sales promotion expenses in the
year 2016 were 236.87 lakhs which is increased to 319.80 lakhs in 2017 and in the
year 2018 it was decrease to 298.01 lakhs in 2018.
Discounting charges: The above analysis shows that the discounting charges in the
year 2016 were 191.48 lakhs which is decreased to 183.69 lakhs in 2015. But in 2016
it again increases to 316.09 lakhs.
Transportation: The above analysis shows that the transportation expenses are
gradually increased from year to year. In the year 2016 was 793.29 lakhs, in 2017
were 907.01 lakhs and in 2018 were1171.62 lakhs which is not good sign for
company.
Insurance: The above analysis shows that insurance charges in the year 2016 was
106.58 lakhs which is increase to 126.24 lakhs but again it was decreased to 113.01
lakhs in 2018.

Table No: 4.4
PERCENTAGE OF MANUFACTURING OVERHEAD ON SALES
(2016 to 2018) (RS in lakhs)
Total manufacturing overheads

Manufacturing overhead = ─────────────────── × 100
Sales
% OF
MANUFACTURING
YEAR SALES MANUFACTURING
OVERHEAD
OVERHEAD ON SALES
2015-16 7184.66 87888.62 8.17%
2016-17 9163.57 113092.18 8.10%
2017-18 9774.62 127080.44 7.69%
INTERPRETATION
The above table shows that the company‟s manufacturing overhead on sales
has been decreased from 2016 to 2018. In 2016 it was 8.17% and 8.10% in 2017. And
again in 2018 manufacturing overhead on sales was decreased to 7.69% which is good
sign for the company.

Graph No: 4.4
PERCENTAGE OF MANUFACTURING OVERHEAD ON SALES
(2016 to 2018)
% of manufacturing overhead on sales

MANUFACTURING OVERHEAD SALES % OF MANUFACTURING OVERHEAD ON SALES
127080.44
113092.18
87888.62
7184.66 9163.57 9774.62

8.17% 8.10% 7.69%
2015-16 2016-17 2017-18
INFERENCE
The above graph shows that the company‟s manufacturing overheads

decreased from 8.17% in 2016 to 8.10% in 2017 which is a good sign to the company.
And again in the year 2018 it was reduced to 7.69% which is favourable to the
company.

Table No: 4.5
PERCENTAGE OF OFFICE & ADMINISTRATION OVERHEAD

ON SALE (2016 to 2018) (RS in lakhs)
Total Administration overheads

Administration overhead = ───────────────────× 100
Sales
% OF OFFICE &
ADMINISTRATION
YEAR SALES ADMINISTRATION
OVERHEADS
OVERHEAD ON SALES
2015-16 14831.62 87888.62 16.88%
2016-17 24785.41 113091.18 21.91%
2017-18 17883.9 127080.44 14.07%
INTERPRETATION
The above table shows that the company‟s office and administration overhead
on sales has been fluctuating from the year 2016 to 2018 due to reduction in office and
administration expenses. In the year 2016 office and administration overhead on sales
was 16.88% which is increased to 21.91% in 2017 and 14.07% in 2018.

Graph NO.4.5
PERCENTAGE OF OFFICE & ADMINISTRATION OVERHEAD

ON SALES (2016 to 2018)
2017-18 17883.9 127080.44 14.07%
2016-17 24785.41 113091.18 21.91%
2015-16 14831.62 87888.62 16.88%
0 20000 40000 60000 80000 100000 120000 140000 160000
ADMINISTRATION OVERHEADS
SALES
% OF OFFICE & ADMINISTRATION OVERHEAD ON SALES
INFERENCE
The above graph shows that the company‟s office and administration
overheads over sales as been fluctuating from the year 2016 to 2018. In the year 2016
office and administration overhead on sales was 16.88%, in the year 2017 it was
increased to 21.91% and in the year 2018 it was again decreased to 14.07%.

Table No: 4.6
PERCENTAGE OF SELLING & DISTRIBUTION OVERHEAD ON SALES
(2016 to 2018) (RS in lakhs)
Total S & D overheads

S & D overhead = ────────────── × 100
Sales
SELLING & % OF SELLING &

Sl.no DISTRIBUTION SALES DISTRIBUTION
OVERHEAD OVERHEAD ON SALES
2015-16 1328.22 87888.62 1.51%
2016-17 1536.74 113091.18 1.36%
2017-18 1898.73 127080.44 1.50%
INTERPRETATION
The above table shows that the company‟s selling and distribution overhead on
sales was 1.50% in 2016, but in 2017 it was decreased to 1.36% due to decrease in
selling and distribution overheads on sales. Again in the year 2018 it is increased to
1.50% which is a negative sign for the company.

Graph No: 4.6
GRAPH SHOWING PERCENTAGE OF SELLING AND DISTRIBUTION

OVERHEAD ON SALES (2016 to 2018)
% of selling and distribution overhead on

sales
% OF SELLING &
DISTRIBUTION
1.50% OVERHEAD ON SALES
2017-18
SALES
1.36%
2016-17
1.51% SELLING &

2015-16 DISTRIBUTION
OVERHEAD
0 50000 100000 150000
INFERENCE
The above graph shows that the company‟s selling and distribution overheads
on sales have been decreased from 1.50% in 2016 to 1.36% in 2017. But in 2018 it
was increased to 1.50% which is not favourable to the company.

Table No: 4.7
TABLE SHOWING SALES GROWTH
(2016 to 2018) (RS in lakhs)
Previous Year
Sales growth = ───────── × 100
Present year
YEAR SALES CHANGES IN %
2015-16 87888.62 100%
2016-17 113091.18 77.71%
2017-18 127080.44 88.99%
INTERPRETATION
The above table shows that there is a decrease in sales from the year 2016 to
2017. The year 2016 is considered as a base year, in the year 2017 the sales are
decreased by 77.71% as compare to base year. In the year 2018 it has been increased
to 88.99%. It shows that there is a rapid growth in sales, by analysing above table it is
found that this growth increases the competency level in the market and also easy to
achieve bench mark of the company.

Graph No: 4.7
GRAPH SHOWING SALES GROWTH
(2016 to 2018)
SALES
350000
300000
250000
200000
150000
100000
50000
0
SALES CHANGES IN %
2017-18 127080.44 88.99%
2016-17 113091.18 77.71%
2015-16 87888.62 100%
INFERENCE
The above graph shows that 2016 is a base year, in the year 2016 the sales was
87888.62 lakhs, in the year 2017 the sales was increased by 77.71%(RS
113091.18lakhs) and again in the year 2018 the sales was increased to 127080.44
lakhs by 88.99%.

Table No: 4.8
PERCENTAGE OF SOLVENCY RATIOS ON DEBT EQUITY
(2016 to 2018) (RS in lakhs)
External equity
Debt equity ratio = ─────────
Internal equity
YEAR EXTERNAL INTERNAL DEBT

EQUITY EQUITY EQUITY
2015-16 28691.53 31996.64 0.89
2016-17 32532.36 37365.53 0.87
2017-18 33360.95 46538.96 0.72
INTERPRETATION:
The table shows the company‟s solvency ratio on debt equity has been reducing from
2016 to 2018 because of growth in internal equity compare to external equity it shows
slight reduction in the debt which is good sign to the company

Graph No. 4.8
PERCENTAGE OF SOLVENCY RATIO ON DEBT EQUITY
(2016-2018)
debt equity
EXTERNAL EQUITY INTERNAL EQUITY DEBT EQUITY
46538.96
37365.53
31996.64 32532.36 33360.95
28691.53
0.89 0.87 0.72
2015-16 2016-17 2017-18
INFERENCE:
The above company shows that, the company solvency position by comparing
external equity and internal equity. In the year 2016 the solvency ratio on debt equity
is 0.89% which is decreased to 0.87% due to increase in internal equity. But in the
year it was decreased to 0.72% due to more increase in internal equity.

Table No: 4.9
TABLE SHOWING CHANGE IN PROFIT/LOSS POSITION
(2016 to 2018) (RS in lakhs)
PARTICULAR 2015-16 2016-17 2017-18
Profit/Loss 4892.54 9155.57 5378.10
INTERPRETATION
The above table shows that in the year 2016 there was profit of 4892.54 lakhs
which was rapidly increased to 9155.57 in 2017 due to increase in manufacturing,
office and administration overheads even though the sales are more. But in the year
2018 the profit was decreased to 5378.10 lakhs due to fewer sales.

Graph NO.4.9
PROFIT OR LOSS POSITION
(2016 TO 2018)
10000
8000
6000
9155.57
4000
4892.54 5378.1
2000
0
2015-16 2016-17 2017-18
Profit/Loss
INFERENCE
The above graph shows that profit and loss position of the company from the year
2016 to 2018. In the year 2016 the company made a profit of 4892.54 lakhs. But in the
year 2017 the profit increased to 9155.57 lakhs because the percentage of sales are
increased even though the overhead expenses are increased.in the year 2018 the profit
is decreased even though the sales more because they incurred more expenses on
overhead .whatever it is the company maintain the stable on profit and sales.

TABLE NO.4.10
TOTAL OVERHEAD COST (2016 TO 2018) (RS.in lakhs)
Manufacturing + administration + selling and distribution

Total overhead = ────────────────────────────────── ×100
Total over heads
SL.NO
Particulars 2015-16 % 2016-17 % 2017-18 %
Manufacturing over
1 7184.66 30.78 9163.57 25.82 9774.62 3.29
heads
office and
2 administration 14831.62 63.53 24785.41 69.85 17883.79 60.50
overheads
selling and
3 distribution `1328.22 5.69 1536.74 4.33 1898.73 6.41
overheads
TOTAL
23344.5 100 35485.72 100 29557.14 100
OVERHEADS
INTERPRETATION:
The above table shows that there is fluctuation in overhead throughout the years. The
total overhead cost has been increased from 2016 to 2017 it was mainly because of
increase in manufacturing overhead and fluctuation in office and administration
overhead. But the selling and distribution overheads are increased from year to year as
the company spent more on promotional activities for the effective competency.

Graph no. 4.10
GRAPH SHOWING TOTAL OVERHEAD COST (2016 TO 2018)
total overhead cost

100000
90000
80000
70000 %
60000
50000 2017-18
40000
30000 %
20000
10000 2016-17
0 %
Manufacturing office and selling and TOTAL
over heads administration distribution OVERHEADS 2015-16
overheads overheads
1 2 3
INFERENCE:
Manufacturing overheads: The above graph shows that manufacturing overheads in

the year 2016 was 7184.66 lakhs and in the year 2017 it was increased to 9163.57
lakhs and again it was increased to 9774.62 lakhs it shows that the company was
spending more on manufacturing expenses to increase the production.
Office and administration overhead: The above graph shows that there is a
fluctuation in office and administration overhead, in the year 2016 it was 14831.62
lakhs. But in the year 2017 it was increase to 24785.41 lakhs and again it was decrease
to 17883.79 lakhs in the year 2018 due to increase in sales.
Selling and distribution overhead: The above graph shows that selling and
distribution overhead in the year 2016 was 1328.22 lakhs which was increased to
1536.74 lakhs as the company giving importance increase in sales. In the year 2018 it
was again increased to 1898.73 lakhs.

5. FINDINGS, SUGGETIONS, AND CONCLUSIONS
5.1 FINDINGS
 The manufacturing overhead is increased from 2016 to 2018

 The office and administration overhead has been fluctuating from year to year
as the component of the overhead are fluctuating such as employee benefit
expenses, rent, travelling conveyance.
 It has found that rent, legal professional charges, security expenses and bank
charges are increased from year to year which not good sign for company.
 The company has spent more money on employee benefit expenses in the year
2015-16 and on sundry expenses in the year 2017-18.
 The company spent more money on legal professional charges in the year
2017-18.
 The selling and distribution overhead of the company have started increasing
from the year 2016 to 2018.
 The percentage of manufacturing overhead on sales is increasing from year to
year.
 The percentage of office and administration overhead on sales is fluctuating
from year to year which is favourable for company.
 The selling and distribution overhead on sales is fluctuating from 2016-17.
 The growth in sales from year to year is increased where the company should
take measures to maintain stability.
 The company solvency ratio on debt equity is decreasing from year to year. It
means there is a growth in internal equity.
 The position of the company in growth is fluctuating from year to year.

5.2 SUGGESTIONS
 The increase in manufacturing expenses like stores and spare parts, water
charges, power and fuel, repair and maintenance will leads more
manufacturing cost therefore the company should take effective measures to
control manufacturing overhead.
 The employee benefits which include salary and wages and bonus this expense
has been increasing from 2016 to 2018 which leads to increase in total office
and administration cost. The company should work to reduce it by appointing
contract labours.
 Increasing in employee benefit expenses (ESI & PF) to employee will leads to
more cost which will have impact on total office and administration cost so the
company should have control on labour usage in the company.
 The selling and distribution overhead has been increasing from year to year,
which will affect the earning capacity of the company. Therefore the
management may take effective steps to reduce the selling and distribution
overhead.
 The company may try to adopt some competitive strategy on sales promotion
and distribution so has to increase their sales more than present sales.
 The management could take most important control measures to control the
expenses like bank charges, travelling conveyance ,power fuel so that it can
reduce the administrative overhead‟
 Materials are the major contribution to overheads by controlling the raw
materials the company can effectively use cost.
 Company should try to reduce the cost of raw material, work in progress, and
finished goods by using the cost control techniques.
 The company should make an attempt to purchase raw materials at economic
cost, the procurement should work more effectively‟
 The company should adopt effective sales promotional measures has it is an
export oriented to face the competition.
 The company should come up with the strategy to increase the marketability.

5.3 CONCLUSION
The company concludes that the company needs to control the cost by using
cost control technique to reduce the cost. By using cost techniques the company
expenses can reduce by taking certain measures; also company will come to know
about sales, profit and loss of the company. Analysis of overhead helps in comparison
of material, labour, production, administration and selling& distribution expenses of
previous year to current year. Despite of difficulties in economic condition and overall
increase in organization growth of our country ASK Automotive (p) ltd has good
demand for its product i.e. its market is steadily increasing. It is the major
achievement of this company. ASK Automotive (P) ltd has capable to increase its
presence in prices of product diversification by effective utilization of manpower and
resources. The process of liberalization resulted in higher industrial growth by
adoption of good and advanced technology. ASK Automotive (P) Ltd has excellent
opportunity for Indian marketers, and tomorrow economy of India whom will have
creative in automobile sectors like creativity, flexibility, open mindedness, risk taking
and innovative spirits. All those characteristics can lead the company on successful
path.

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A STUDY ON “IMPACT OF OVERHEAD COST ON

PROFITABILITY AT ASK AUTOMOTIVE (P) LIMITED

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 1

1.3 STEPS IN OVERHEAD ACCOUNTING

1.3.1 COLLECTION OF OVERHEADS

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 2

expenses according to standing order numbers at the source itself, is known as

1) Indirect materials Material requisitions

1.3.2 CLASSIFICATION OF OVERHEAD COST

A. Functional wise Classification of overhead

B. Element-wise Classification of Overhead

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 3

C. Behavioural Classification of Overhead

A. Functional Classification of Overhead

a) Manufacturing or Production or Works Overhead

It is the indirect expenditure incurred in composing or formulating the policy,

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 4

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 5

Table No: 1.1

Source: M.N.Arora, “Management Accounting” Himalaya Publishing House.

B. Behavioural Elements of Overhead Classification

a) Fixed cost of Overhead

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 6

 Long-run capacity fixed overhead

1.3.3 APPORTIONMENT OF OVERHEAD

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 7

7. Purchase department – Number of purchase orders

The basis of apportionment of expenditure of common system have been

1.3.4 RE-APPORTIONMENT OF OVERHEAD

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 8

departments must be charged to production department. There various methods of

1.4 ABSORPTION OF OVERHEAD

1.4.1 METHODS OF ABSORPTION

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 9

Percentage on direct wages: - In this method percentage of factory overheads to

1.5.1 Meaning of Variance

1.5.2 Favourable and Unfavourable Variance

1.5.3 Utilities from Variance Information

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 10

1.5.4 Meaning of Overhead Variance:

Overheads are understood as the aggregate value of indirect material, indirect

Standard cost accounting system as three steps involved in isolating overhead

1. Factory overhead incurred recognized on the basis of actual cost

Total factory overhead

SOAR=Standard Overhead Application Rate

1.5.5 Capacity levels

In overhead variance analysing the capacity measurement these are either

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 11

Table No: 1.2

TABLE SHOWING STATEMENT PREPARED BY VARIOUS

Sl.No Variance Personnel/Department Responsible Control

1 Overhead spending variance Variable portion is responsibility of

2 Overhead Efficiency Variance Some person responsible for Labour

3 Overhead Volume \Variance Top management and production

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 12

2. REVIEW OF LITERATURE AND RESEARCH DESIGN

2.1 TITLE OF STUDY

A study on “Impact Of Overheads Cost On Profitability” with reference to ASK

2.2 REVIEW OF LITERATURE

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 13

Caroline Takwa Chan & Christine Pasqire (2010) “Estimation of project

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT 14

Patrick Roney (2007) “A study of the impact of foundations overhead payment